DoD awards $54.4M for spare parts, raising questions about competition and value

Contract Overview

Contract Amount: $54,430,730 ($54.4M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-08-07

End Date: 2027-05-20

Contract Duration: 1,382 days

Daily Burn Rate: $39.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LOT 4 PRODUCTION SPARE DELIVERY ORDER AWARD

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $54.4 million to LOCKHEED MARTIN CORPORATION for work described as: LOT 4 PRODUCTION SPARE DELIVERY ORDER AWARD Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The firm-fixed-price contract type shifts risk to the contractor, which can be beneficial for the government. 3. The duration of the contract (over 3 years) suggests a need for sustained support for critical systems. 4. The award is for spare parts, indicating a focus on sustainment and readiness rather than new development. 5. The lack of competition raises concerns about whether the government received the best possible price. 6. The contractor, Lockheed Martin, is a major defense supplier, suggesting this is a significant but not unusual award for them.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without competitive bids. The firm-fixed-price structure is generally favorable for the government in managing cost overruns. However, the absence of competition means there's no direct market comparison to assess if the pricing is truly optimal. Given the sole-source nature, it's difficult to definitively state if this represents excellent value for money compared to what could have been achieved through a competitive process.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was solicited. This approach bypasses the standard competitive procurement process, which typically involves soliciting bids from multiple vendors. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they generally lead to less price competition and can result in higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may not be benefiting from the most cost-effective pricing available in the market. Without multiple bids, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Army, which will receive essential spare parts for its systems. This contract ensures the continued operational readiness and sustainment of critical military equipment. The geographic impact is primarily within New York, where the contractor is located, but the ultimate impact is on military readiness nationwide. The contract supports the defense industrial base and the workforce employed by Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Lack of transparency in the justification for a sole-source award.
Potential for cost creep if not rigorously managed, despite firm-fixed-price structure.

Positive Signals

Firm-fixed-price contract type shifts cost overrun risk to the contractor.
Award to a major defense contractor suggests established capability and reliability.
Contract supports critical spare parts, ensuring operational readiness of military assets.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector. This is a specialized segment of the defense industrial base focused on high-technology components for military platforms. Spending in this sector is often characterized by long-term sustainment contracts for complex systems, with a limited number of highly capable manufacturers. Market size is substantial, driven by ongoing defense modernization and readiness requirements.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the nature of the award and the contractor, it is unlikely that significant subcontracting opportunities for small businesses will be mandated or readily available through this specific award. The focus is on a large, established prime contractor for specialized defense components.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management systems. The firm-fixed-price nature provides some inherent cost control. However, the sole-source award necessitates robust oversight to ensure the necessity of the sole-source justification and the reasonableness of the price. Inspector General involvement would be contingent on specific audit triggers or allegations of impropriety.

Related Government Programs

Department of Defense Procurement
Military Spare Parts Procurement
Aeronautical and Nautical System Manufacturing
Lockheed Martin Contracts

Risk Flags

Sole-source award without clear justification
Potential for non-competitive pricing
Lack of transparency in procurement process

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $54.4 million to LOCKHEED MARTIN CORPORATION. LOT 4 PRODUCTION SPARE DELIVERY ORDER AWARD

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $54.4 million.

What is the period of performance?

Start: 2023-08-07. End: 2027-05-20.

What is the specific justification provided by the Department of the Army for awarding this contract on a sole-source basis?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source procurements are justified under circumstances such as when only one responsible source is available, or when a public exigency requires immediate contract award. For a contract of this value and duration, a detailed justification, often including market research and a determination of the unavailability of competitive sources, would be required by federal acquisition regulations. Without this justification, it is difficult to assess the necessity and validity of bypassing the competitive process.

How does the firm-fixed-price (FFP) contract type benefit the government in this scenario?

The firm-fixed-price contract type is generally advantageous for the government as it places the risk of cost overruns on the contractor. This means that the contractor is obligated to complete the work for the agreed-upon price, regardless of their actual costs. For spare parts delivery, this structure provides budget certainty and protects the government from unexpected increases in material or labor costs. However, the benefit is maximized when the initial price is competitive, which is a concern with sole-source awards.

What is the historical spending pattern for similar spare parts with the Department of the Army or Lockheed Martin?

The provided data does not include historical spending patterns. To assess this, one would need to analyze past contracts for similar spare parts, potentially from the same contractor or for comparable systems within the Army's inventory. Analyzing trends in pricing, volume, and contract types over time would reveal if this $54.4 million award is consistent with previous spending, or if there are significant deviations that warrant further investigation, especially considering the sole-source nature of this award.

What are the potential risks associated with a sole-source award for critical spare parts?

The primary risk of a sole-source award for critical spare parts is the potential for inflated pricing due to the lack of competition. Without competing bids, the government may pay more than necessary. Additionally, sole-source awards can sometimes indicate a lack of market research or an over-reliance on a single supplier, which can create long-term dependencies and limit flexibility. There's also a risk that the contractor may not be incentivized to innovate or improve efficiency as strongly as they would in a competitive environment.

What is Lockheed Martin's track record in delivering spare parts for defense systems?

Lockheed Martin is a major defense contractor with extensive experience in producing and delivering a wide range of defense systems and their associated spare parts. They have a long history of supporting complex platforms for the U.S. military and international allies. While their track record generally indicates capability and reliability, the specifics of their performance on any given contract, including timeliness and quality of spare parts delivery, can vary. Independent performance reviews and past performance evaluations would provide a more granular assessment.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 497 ELECTRONICS PKWY BLDG 5, LIVERPOOL, NY, 13088

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $54,430,730

Exercised Options: $54,430,730

Current Obligation: $54,430,730

Subaward Activity

Number of Subawards: 90

Total Subaward Amount: $29,185,880

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56KGY22D0001

IDV Type: IDC

Timeline